almost sovietIn a beautiful piece of historical scholarship twenty years ago, the economic historian Naomi Lamoreaux (go, team) argued that historians have overestimated the market dominance of giant industrial conglomerates in the age of the robber barons. Big mergers, Lamoreaux argued, frequently produced unwieldy and inefficient companies that were ripe targets for new competition. Conglomerates formed around old factories and the last generation of technology; new competitors could start fresh, keep costs low, and offer strong challenges on price and quality. Monopolies had their time, but then were generally challenged in the marketplace and pushed aside.
The analogy certainly isn't exact, but all kinds of interesting journalism this holiday season suggests that Wal-Mart is in trouble. Target is competing with brand differentiation and clever marketing; Sears and K-Mart have merged, and will apparently compete on price and quality. The point is that other stores can and will compete, and an apparently stagnant management climate at Wal-Mart has helped to make that possible. The Slate story I've linked to above includes an enjoyable quote about Wal-Mart from James Cramer: "The stores are dowdy. The aisles are ugly. There's nothing exciting or different or even colorful at Wal-Mart. It feels almost Soviet in its selection and presentation." That kind of description doesn't exactly make Wal-Mart sound like a scary and unstoppable economic force.
In short -- and I don't pretend that this is the complete picture -- it seems to me that at least some of the political handwringing in the last few years over the evil, downtown-killing, soul-deadening, employee-abusing Wal-Mart monster has granted that corporation a lot more market power and cultural power than it ever really had. Every corporation has weak spots; no player in the marketplace is untouchable. Economic power tends to come in a package with economic vulnerability.
There are some interesting implications, and it'll be fun to see what develops over the next five years. Will Target, Sears, and K-Mart compete with Wal-Mart for quality employees? Can Wal-Mart be pushed by market forces to improve employee benefits?
It seems to me that the emerging narrative here serves as an argument for marketplace solutions to marketplace problems. Again, I doubt that this is the whole picture, but it does seem to me that it's more effective to compete against corporate giants than it is to legislate against them.